What are startup costs in business?

Startup costs in business refer to the initial expenses that a company incurs before it begins production or starts selling its products or services. These costs can include a wide range of expenditures such as purchasing equipment, securing business licenses, setting up a business location, marketing efforts to promote awareness, and other necessary expenditures that establish the foundation of the business.

By understanding that these costs represent the financial outlay required to kickstart operations, one can see how they differ from ongoing expenses, which are incurred continuously once the business is established. Options regarding costs associated with new inventory or employee salaries do not capture the full scope of what startup costs entail, as these are typically considered operational expenses rather than foundational costs necessary to initiate the business. In summary, identifying startup costs as initial expenses before production encapsulates the necessary investment required for a business to move from concept to operational status.